Capacity & Estate Planning

KEY TAKE-OUTS

Estate Planning commonly includes three separate documents: Wills, Power of Attorney and Enduring Guardianship documents.

1. I can write a Will from the age of 18 but what if I was in the hospital and suffering a period of incapacity?
2. Can a doctor decide whether I can instruct a lawyer to draft my Will?
3. Can I instruct a lawyer to draft Estate Planning documents for my elderly parents who are in a nursing home and unable to make their own decisions?

In Australia, we have the ability to choose what we would like to happen with our assets should we pass away. However, it is understandable that for most people, Estate Planning may be an uncomfortable topic to broach. Perhaps not a BBQ conversation or household dinner chat. Many would prefer not to turn their mind to the thought of Estate Planning as “the law can just decide for me”, or “that will never happen to me”.

In my earlier blog, “I Don’t Need a Will. I’m Too Young!”, I guide readers to the realisation that Estate Planning is valuable, regardless of how little or how much you own. However, an important note to flag is, you must have capacity to write your Will, appoint an Attorney (Power of Attorney) and appoint a Guardian (Enduring Guardian).

Most commonly, when we speak of capacity, many will assume this is regarding mental capacity only. However, in Australia, when a lawyer is instructed by a client to draft Estate Planning documents, they must consider varied signs to determine whether their client can provide instructions to draft and execute these documents.

When you were in school there may have been a teacher that reviewed your work and would look for all of the things that were wrong to mark you down at each turn. Importantly, at common law, there is a presumption that all people (of legal age) have the mental capacity to make their decisions. Therefore, if a client is elderly and living in a nursing home, this does not automatically mean that a presumption is made against them that they are unable to make their own decisions.

Many family members may assist their elderly parents in booking an appointment, however, the important factors to note are – instructions must always be provided by the client only and the client is the only person able to be in the room for the appointment. Lawyers have a duty to protect each client’s best interests and where vulnerable clients are involved, this need is further highlighted.

Every Person is Different

There are many signs for a lawyer to consider when understanding whether a client can make legal decisions. Keeping in mind that capacity may come in ebbs and flows and different levels of capacity are required to do different tasks in day-to-day life. Estate Planning requires a delicate approach and a deeper understanding of the client’s needs, family life and assets.

An example: Where a client has been diagnosed with dementia, this does not automatically mean that they are unable to make a Will, Power of Attorney and Enduring Guardianship. With an aging population and an increase in dementia diagnosis, it is paramount that lawyers turn their minds to the varied needs of their clients and the assessment that must be made before denying access to Estate Planning. What is it that you wish for the lawyer to draft? Do you know what you own and who you may consider receiving your assets? Where there is difficulty to recall details of the matter during an appointment and ongoing trouble communicating, these are some notable factors that contribute to the outcome of incapacity when assessing a client’s capacity to give instructions.

Similarly, the fluidity of capacity isn’t to be understated. Should a person suffer an accident resulting in hospitalisation, they may not have physical and mental capacity and the treating doctor assesses that they are unable to make decisions at that time. Perhaps as days go by, they can write their wishes/speak their instructions but remain in hospital. A lawyer may attend and undertake their own assessment as to the client’s ability to instruct on a Will, Power of Attorney and/or an Enduring Guardianship. Common law has found different levels of capacity may be required for each and that capacity varies depending on the context.

What If I Can’t Instruct the Lawyer?

If the lawyer is unable to take your instructions, as they have assessed that you do not have legal capacity at the time), then your family/friend/trusted person may apply to the NSW Civil & Administrative Tribunal for Guardianship Orders and/or Financial Management Orders. The time that it takes to progress an application depends on the risk to the person and the time it will take to gather evidence.

The importance of considered preparation of Estate Planning avoids the difficulty that may occur in gaining Financial Management and/or Guardianship Orders, where incapacity is at hand.

A Concluding Thought

Previous clients have commented that I am a “personable lawyer”. This is something that I wear with honour, as I strive to assist my clients to feel more comfortable when discussing Estate Planning and preparing for the ‘what if’ of incapacity. Education is key and for me, the preparation is about enabling as many people as possible to implement appropriate steps to protect their needs during their lifetime and once they have passed away. Lawyers should carefully approach questions of capacity with attention to “nature, terms, purpose and context”.